The deed of trust is security for the deal, so releasing the deed of trust in and of itself would not void the promissory note or agreement and make the $26,000 uncollectible. So, you can still proceed with a lawsuit based on the outstanding amount and reduce it to a judgment. Once successful, you can proceed to collect on that judgment. Like all creditors, once the amount is reduced to a judgment you could file a judgment lien and, depending on various factors (for example the homestead exemption) could then foreclose to satisfy your judgment.

Instead, by releasing the deed of trust, you have changed your status from a secured creditor to an unsecured creditor. This means you no longer have a priority claim to the property, and other creditors can place liens and satisfy their debts before you. Additionally, in the event of a bankruptcy, your unsecured status could affect how the bankruptcy court treats your debt.

It's important to recognize that specific outcome will depend on the agreements and actions between the parties and I can only give you general information. For example, if the deed was released with the understanding that the debt was satisfied, this could potentially making the debt uncollectible.

Given the complexity of this situation, I recommend having an attorney review your deal documents, deed of trust, and the release. An attorney can provide a detailed assessment of whether there is a viable path forward to collect the amounts owed to you.

If you would like to speak with an attorney at our firm about your case, we would be happy to review your documents and discuss your options. You may also be interested in our article about Enforcing a Promissory Note.